Chinese online suppliers eye spending restraints

China’s E-commerce is due to encounter an unprecedented challenge in 2012. A non-profitable status and ever-increasing operating costs have forced online retailers to think twice before any risk investment is made. Those competitors, whose long-time weapons have been price battles against each other, have now started to think more about how to make money.

360buy.com, China’s biggest independent online shopping platform, seems to be blowing a wind of change in the whole business arena.

360buy.com completed a C round of financing last May by gaining a total investment of .5 billion, the largest single financing in China’s Internet industry. Among them, a renowned international investment firm Digital Sky Technology (DST) holds 5% of 360buy’s shares after it announced an investment of 0 million in it last April.

In other words, 360buy.com has been long regarded as the most well-funded online retailer in China. It has also been known for its low-price strategies in the battle for a higher market share over the past few years. It overtakes Amozon China by a remarkable edge in term of the market share of 3C products in China. In May 2011, Liu Qiangdong, CEO of 360buy.com, said 360buy aimed to exceed 100 billion RMB in sales within 3 years.

But during the recent Chinese Lunar New Year festival, 360buy.com was edging towards a new strategy. Internet researchers said 360buy.com started revising up the price of its products from the beginning of 2012.

According to statistics provided by eTao, the eCommerce product search engine owned by China’s largest eCommerce site Taobao, 360buy.com has raised the price of its products by up to 15% over the past few weeks.

Although 360buy.com firmly rejects the figure, many of its customers have complained in their microblogs that the goods on 360buy.com are not as cheap as before. Chinese customers, who have been used to 360buy ’s low prices, could be discouraged by a price rise there and turn to offline stores or other online retailers for a price comparison.

In an attempt to increase profits and cut expenditure, 360buy has been introducing more talents from other companies. Among the latest to join 360buy are Lan Ye, former head of Acer China, whose coming is expected to bring 360buy more commercial clients; and Wang Yaqing, former global vice president for Oracle, who has assumed the role of CTO (Chief Technology Officer). IT has been one of the major fields of investment for online retailers. Complaints have flooded in before as customers were denied access to 360buy.com due to a steep rise in visits during the previous promotion campaigns.

Obviously, as it has been tested by Amazon, these tactics would not be as simple and effective as launching a price battle. But as it shows that nowadays, China’s online retailers seem to have little opportunity to push through further price battles as easily as their predecessors once did.